Fixed Income Leaders 2018

06 - 08 November, 2018

Beurs van Berlage, Amsterdam

44(0) 207 368 9540

FILS Expectations: New Models, New Skills and a Measure of the Market

The DESK spoke with members of the advisory panel for FILS Amsterdam to assess the likely agenda.

Originally published by The DESK – Official Publication of The Fixed Income Leaders Summit

Technology will impact the way that traders engage with the market, whether through automation of the trading desk via artificial intelligence or the use of distributed ledgers to support the issuance and settlement of securities.

“I would like to have some streams about artificial intelligence and Blockchain,” says Saab.

Mapping and understanding a universe of 70,000 instruments is something that an AI or machine learning system could achieve, and support automation of the trading process.

One senior trader observes, “If a system can learn how to get exposure to certain cash flows, you can put in a request to look for exposure with given risk parameters, and it can match that request up to the liquidity that is out there.”

Heads of trading expect to see their own activities and performance become increasingly quantified and measured, which will require a more scientific approach to trading and the management of trading.

Poole says, “Clients are asking about the explicit costs of trading and so there will be a greater focus on best execution analysis (BXA) because TCA for the moment is not working and it is one of the biggest frustrations out there.”

Platforms will be launching in the credit and rates spaces over the next year and the FILS event will be a point at which traders can reflect upon the advantages they offer.

“If we use a platform it is because it offers the best price and/or responded fastest,” says the head of desk at a major asset manager. “Where platforms struggle is finding a way to do that systematically. The hit ratios are much lower on platforms for fixed income than for equities, so if engagement is not systematically automated, the trader faces a lot of work to engage, for low returns.”

The shift away from a qualitative approach will assist in understanding the value these new markets provide.

Carl James, global head of fixed income trading at Pictet Asset Management, says, “We are moving away from muscle memory – humans repeating actions – and becoming much more led by data, so we might change the execution venue based upon quantitative assessment.”

In addition to technology, this will require heads of desk to assess the types of trader they employ and the skill sets they have. As the business becomes more quantified, traders will need to have the skills to apply that approach to their dealing.

“We want to assess traders’ risk appetite, reaction to stress and assessment of behavioural responses,” says James. “There is quite a change in behaviours expected on the trading desk of the future and we need to appraise for that, not for the way things used to be done.”

However some of the agenda will only be realised through the year, as authorities clarify – or otherwise – the regulatory framework for market participants.

“There will be more of a push to understand what regulators want,” says Poole. “At present whenever they come back to us to clarify a point the goalposts have moved a bit, so it would be positive to have more certainty around what we should be focused on. By November I would expect regulators to have provided a lot of that clarity.”

Make sure to download the Fixed Income Leaders EU agenda to check out all of the great activities, speakers, and sessions planned for this year.